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April 12, 2012

What Is Google Doing with Motorola Mobility?

When Google acquired Motorola Mobility in August 2011 for $12 billion, the search giant said the main reason was for the company's 17,000 patents. Dennis K. Berman, writing in The Wall Street Journal, says Google's intentions are less clear.

Motorola Mobility's patent portfolio may defend Google from lawsuits, especially the “thermonuclear war” Apple is waging, but the livelihoods of the company's 20,500 employees spread out among the globe still hang in limbo.

“With Google stock down 3 percent per year to date, compared with a 15-percent rise for the NASDAQ Composite, it seems logical that Google might just sell off these metal-bending headaches and focus on its strength – spreading mobile Web search around the world,” Berman wrote in WSJ.

Berman also spent three weeks talking with Google and Motorola employees, and doesn't seem to like what he heard: “The disquieting answer is that there appears to be no sense that a choice is even required. There's only a cocky belief that Google really can be all things at once: a hardware company with software margins, and a neutral Android arms dealer that just happens to be building its own Motorola army on the side.”

Verizon CEO Lowell McAdam, however, told Berman that the move would allow Google to “push the envelope a bit.”

An anonymous rival executive, however, dubbed the acquisition a “hairball.”

Larry Page, Google's CEO, said he was excited about the venture. The company wants to make Motorola a major player in the smartphone segment. Motorola's phones currently account for 4 percent of smartphone sales.

Android, however, is used by a wide variety of manufacturers as an open source smartphone OS. Google will have to balance promoting its own hardware while keeping the manufacturers it now competes with happy.

“Android is a simple trade. Gadget makers get top-notch software. Google gets to preload its services, such as search and maps, on the 850,000 devices that are activated each day,” a deal Berman writes will only hold as long as phone makers trust Google.

Andy Rubin, Google's senior vice president of mobile, denied that Google would favor Motorola's phones over other manufacturers. He said that Motorola would maintain autonomy and that there would even be a “firewall” between the two companies.

Other mobile manufacturers seem willing to declare independence from Google as well. Samsung participates in an advertising network that competes with Google, and Amazon's Kindle Fire runs a version of Android so heavily modified, or “forked,” that many users don't actually recognize it as Android.

Although Google denies it has plans to keep its patents but sell off its manufacturing business, that's what analysts suggest they do. “Compared to what Google does, the smartphone business has horrible economics," Pierre Ferragu, an analyst at Bernsetin told Berman. "The reason to buy Motorola was to strengthen patents. Now they have that, the logical thing is to sell the rest."

Edited by Braden Becker

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